big boys come out to play, page-16

this may help explain it.........

Banks rorting shorting banMichael Pascoe
March 2, 2009 - 9:22AM
As ASIC considers extending its self-imposed deadline of this Friday for lifting the short-selling ban on banks, financial stocks and Real Estate Investment Trusts – and perhaps still wrestles with understanding what shorting actually is – a prominent market player is claiming the protected investment banks themselves are rorting the system to short the theoretically unshortable.

Charlie Aitken, head of institutional dealing at Southern Cross Equities, has told clients ASIC’s effort is a Claytons ban, which helps explain why many “protected” financial stocks continue to fall aggressively.

“From what I understand, most of the major global investment banks offer structured over-the-counter derivative products to ‘get around’ the shorting ban,” writes Aitken.

“These include ‘forward sales agreements’ over placement stock. If you are a big enough hedge fund customer you can still effectively short unshortable stocks in Australia and this clearly explains why the shorting ban has been ineffective in stopping the share price rot. Look at Macquarie, for example. You can't tell me it isn't still being shorted.”

The irony of the investment banks – what’s left of them - still being a protected species themselves around the world should not be lost on our regulators while they’re being lobbied by Macquarie et al for an extension of the shorting ban, even it if only keeps small fry out of the green-mail game.

Aitken wonders if the regulators and federal government even realise the shorting ban is being aggressively circumvented.

“I also wonder whether they realise that some of those listed companies actually protected from shorting are facilitating hedge funds getting around the shorting ban? In at least one case this behaviour is totally hypocritical,” he writes.

Aitken argues that Australian banks don’t need the short ban protection and would rally if it was removed, but in the meantime the shorts continue to play.

“Macquarie remains under a shorting and rumourtrage attack,” he says. “Macquarie is being attacked by shorters of the satellites, but it is blatantly obvious that shorters are also still shorting the head shares via some sort of derivate arrangement with another bank.

“Clearly the shorters are waiting for chief executive Nicholas Moore to blink. In the same style, they have forced/bullied other Australian companies to issue unnecessary new equity at a ridiculous discount (Wesfarmers, for example, which now has too much capital); they are now attempting to force Macquarie to issue equity at a big discount so they can cover their shorts. Many Australian companies have blinked, but will Macquarie?

“So far it has been stoic in the face of a collapsing share price (down 82% from its peak). Yet I'll bet many other investment bank advisers are calling on the Macquarie board telling them “you need to raise equity to end the shorting attack”.

“That is total rubbish and it's about time corporate Australia stopped listening to investment bankers who have the vested interests of short hedge funds at heart.”

Hypocrisy, your name is finance.